Among the contributions made by ERG towards reducing the cost of staff in departments are changes to the Civil Service Compensation Scheme; restrictions on employing consultants and temporary staff; and the monitoring of the recruitment of permanent staff, central control over procurement of common goods and services and review of major ICT and other projects.

Today’s report does point out that savings to date have differing degrees of sustainability. The level of savings from commercial negotiation with major suppliers and from the advertising moratorium was lower than that in 2010-11. Similarly, some of the 2011-12 savings are unlikely to be sustained.

ERG introduced a clearer and more responsive organizational structure in 2012 and published its first business plan in early 2013, covering all areas of its activities. It is not fully clear how ERG intends to make the reforms necessary to secure £20 billion of annual savings over the rest of the spending review period. Until recently, ERG’s focus has mainly been on the savings themselves, with less emphasis on the longer-term changes and improvement in efficiency necessary to make them sustainable.

ERG is now making good progress in developing strategies in some of its areas of saving activity and it is also beginning to coordinate these strategies with departments.  Among the remaining weaknesses identified by the NAO are that ERG’s strategies include large savings ambitions but the plan for meeting the £20 billion savings aspiration is still in its early stages. ERG, together with departments, also needs a more sophisticated understanding of risks to services at a time of major restructuring.

Today’s report points out that ERG has been strongly led by the Minister for the Cabinet Office, while the Group’s close links with cabinet sub-committees have helped it to promote collective agreements across departments. ERG is also acting to improve the effectiveness of its relationships with departments but it recognizes that its staff turnover, at 25 per cent a year, is too high, with particularly frequent changes at senior level.

Previous NAO reports have highlighted significant potential for financial savings and service improvements. For example, more efficient and better coordinated use of office space could reduce central government property costs by £650 million a year by 2020. Each of the areas in the Whole-Place Community Budgets scheme has identified potential benefits from taking a more integrated approach to frontline services, focusing on outcomes like preventing avoidable hospital admissions or reducing reoffending. Greater Manchester, which covers ten local authorities, has estimated net savings of some £270 million over five years, while in West Cheshire savings of £56 million are estimated for the same period.

In general, government has only limited information for identifying opportunities for integration or making an assessment of costs and benefits, which is needed to support the case for integration. In some instances where government has identified integration opportunities, benefits have not been achieved because of implementation difficulties, for example where government has underestimated the challenges integration has posed or there has been a lack of incentives for bodies to work together.

In the 17 departmental business plans published in May 2012, 24 per cent of departments’ 444 ‘actions’ referred to joint working with other departments. NAO analysis suggests there are varying degrees of collaborative working across departments. While the centre of government has recognized the importance of integration, it does not have clearly defined responsibilities to support or encourage frontline integration initiatives across government.

While it is early days for Whole-Place Community Budgets, central government and the four local areas have worked together effectively to assess the case for local service reforms.

The true scale of potential benefits will become clear only if projects are implemented and evaluated robustly. Foundations have been laid but continuing collaboration – including sharing of data – between local and central government and delivery partners is essential to maximize the potential of Whole-Place Community Budgets. There is some room for improvement. For example, local areas recognized that in some cases they needed better information on the costs and effectiveness of current services, to mitigate the risk of over or under-estimating the benefits of change.

Since 2010, the government has made a number of changes to its procurement structures and processes. There have been signs of good progress in key areas: expenditure on common goods and services is more centralised; participation by small and medium enterprises (SMEs) has increased; and the Government Procurement Service is an improvement on its predecessor. The creation of a Chief Procurement Officer and associated positions has formed clearer lines of responsibility at the centre, and the Cabinet Office now has a firmer grip of procurement expenditure. Overall, the NAO expresses confidence in the Service’s reported savings of £426 million in 2011-12 as a result of reductions in price owing to centralised procurement.

Nevertheless, there have been problems in implementing the reforms, including ineffective governance structures, unrealistic targets, incomplete data and weaknesses in contract management. Government is not maximising the potential for savings through centralised procurement. It has succeeded in increasing spending through central contracts from £2.6 billion in 2009-10 to £3 billion in 2011-12 but this is still less than half of its spending on common goods and services. The Cabinet Office’s most recent forecast is that this will grow to £5.3 billion in 2012-13.

There are some operational issues with GPS’s management of the central contracts, with departments raising concerns about the inconsistency of contract management and the quality of customer service. While departments need to make compromises and adapt to a more standardised approach, there are cases where the central contracts do not meet departments’ operational needs, in part due to a lack of consultation when developing the specifications. These weaknesses in implementation mean that the centralised approach is not releasing procurement resources in departments as originally expected.

Roles and responsibilities for day-to-day contract management are unclear and there are inadequate mechanisms by which departments and the centre of government can hold each other to account.

Although the C&AG has found significant improvement in records kept for the pension schemes, as in the 2010-11 accounts the C&AG has qualified his audit opinion in two respects.

First, the Cabinet Office has not retained, or been able to provide the NAO with, sufficient records to enable the spending watchdog to confirm all pensioners or other beneficiaries have received the correct payments, in accordance with the rules of the Scheme.

Secondly, given his concern over the records held, the C&AG sought assurance that the estimated pension liability of £144 billion, based on the Scheme’s membership records, was reasonable. The evidence presented to him was insufficient to give him that assurance.

Pensions awarded under the PCSPS are linked to a member’s length of qualifying service and salary. In some six per cent of the cases (by value) tested by the NAO, insufficient evidence was provided that the correct payment had been made.

PCSPS is to undergo a period of significant change which may increase the risks identified by this audit.

Government has signalled its commitment to the principle of early action but there is little evidence of a concerted shift in resources to early action projects, or cross-government coordination, either in consistent definition and measurement or in establishing adequate support structures.  Determined leadership is necessary to divert resources away from pressing and highly visible current needs, in line with public expectations, towards long-term early action programmes, particularly at times of fiscal austerity.

Strong evidence of early action’s impact and cost-effectiveness is thin on the ground within current projects. Moreover, since information on costs within most departments is also patchy, specifying an amount that could be reduced within the estimated £377 billion spent on ‘social’ spending in 2011-12 is not possible.

However, projects with the strongest evidence base show that some early action projects can achieve returns of up to 4 to 1.  Recent NAO reports also demonstrate value for money potential in early action.  For example,  the 2011 report on the Oversight of special education for young people aged 16-25 estimated that the cost to the public purse of supporting a person with a moderate learning disability through adult life of £2 to £3 million at today’s prices could be reduced, with the right support, by around £1 million.

Today’s report examines early action in relation to health, education and youth crime reduction policy. The Government has stated that early action is at the heart of its work on social justice. It has adopted the principle that early action is important in public service provision but does not plan a significant shift in resources. The total amount spent each year by the Department of Health, Department for Education, Home Office and Ministry of Justice on early action intervention programmes has remained fairly constant at around £12 billion, about 6 per cent of the departments’ spending in 2011-12.

The NAO has identified four key challenges the addressing of which could help in the design and implementation of early action programmes: namely, more consistent and robust gathering of evidence of what works; overcoming short-term thinking and other practical barriers; effective cross-government coordination of early action; and strengthening departments’ capacity to innovate and take bold long-term decisions.

The Government’s ability to show that its spending decisions represent the best value for money is being hindered by the patchy availability of good information.

Today’s report by the National Audit Office shows that many aspects of government budgeting compare well with good budgeting  practice – particularly in support of the Treasury’s objective to control spending.   The system is less effective at addressing objectives for prioritization of public spending and delivery of value for money across government.

In 2012-13, the Government expects to spend £683 billion. The Treasury designs and manages the Government’s budgetary system; departments manage their spending within the rules Treasury sets. Its spending review 2010 (SR10) and subsequent annual budgets have focused on reducing spending to tackle the fiscal deficit. The NAO estimates that SR10 cost departments and the Treasury around £20 million to administer.

There were improvements in the last spending review to how spending on capital projects was allocated. However, the approach to prioritizing resource spending, which represents nearly 90 per cent of all controllable spending, was less structured.  Departments were initially unable to supply all of the information Treasury requested.  While the Treasury made efforts to close information gaps during the review, the scope and quality of departmental data varied. In particular, information on the cost-benefit of resource spending was patchy and often made comparisons within and between departments difficult. 

The NAO has also found that the departments only weakly integrate budgets with their corporate operational plans. The budgetary system encourages departments to bid for funds based on their specific needs, and does not promote cross-government working. 

There are promising budgeting developments in some departments, including innovative methods of internal challenge, improved aspects of external challenge and strengthened links between performance and spending. However, the Treasury could still play a greater role in helping each department learn from the experience of others.

The Treasury’s main contact with departments is through spending teams which make valuable contributions to spending control. However, their ability to challenge proposals is hampered by limited information and high staff turnover – with only eight out of 52 staff members still in place 20 months after SR10.

Government is not getting the most out of the £70 million it spends on internal audit because the service does not always focus on the right issues and it is often not of sufficient quality to be useful in decision-making.

According to today’s report, Chairs of Audit Committees and other senior stakeholders expect more from their internal audit service. Although 84 per cent of respondents to an NAO consultation considered internal audit added some or substantial value to their organization, they had concerns over the current depth of insight, relevance and underlying execution of internal audit work. Many key stakeholders believe that internal audit work is not sufficiently tailored to be relevant to the different issues facing individual organizations.

Treasury guidance on what internal audit should deliver is not sufficiently specific, leading to expectations of internal audit being unclear. There is little consistency in the application of standards. Variations in quality and coverage mean that the NAO often cannot take assurance from internal audit work, and it is often of insufficient scope or quality for the spending watchdog’s external audit work.

There are specific areas where internal audit could be more effective. Users of internal audit identified particular gaps in such areas as the usefulness and relevance of reports; the expertise of staff, including expertise on IT-based information systems; the identification of efficiencies in the organization; and the ability to offer advice to senior management. Some 40 per cent of stakeholders thought some or substantial improvement was needed in the expertise or professionalism of internal audit.

HM Treasury’s Internal Audit Transformation Programme is a partial solution to the issues identified by the NAO, but the project does not consider, in sufficient detail, what should be expected of an effective internal audit service. Nor does the Treasury have an accurate view on the costs of internal audit in government.

The National Audit Office has today published a report on the effectiveness of central government’s communication with local government.

The report recognises that, now more than ever, it is essential that central government communicates and engages well with local government. Responsibilities such as public health are moving to local government, local authorities are playing a vital role in the Government’s decentralisation agenda, and substantial reductions in staff are causing pressure.

It is clear that there is goodwill on both sides and that they are directing considerable energy at improving how they communicate with one another. However, the organisational differences between central and local government make communication very challenging. Where departments are designing services for local delivery, the operational experience of local authorities is important to the effective design and implementation of programmes.

The NAO’s work across government has also demonstrated that not consulting local delivery partners early brings a high risk of waste and ‘optimism bias’ that can result in the failure of programmes. For example, a July 2011 NAO report cited how insufficient engagement with fire and rescue authorities and failure to gain the support of most end users contributed to the cancellation in 2010 of the major project to replace control rooms.

Some policy consultations are rushed. In two-thirds of consultations by seven departments analysed by the NAO, the departments allowed less than the 60 working days suggested in their own code of practice. Departments also issue a disproportionate number of consultations just before parliamentary recess and holiday periods of Easter, summer and Christmas. Many local authorities therefore find it difficult to co-ordinate their work on these consultations with their own political or business cycles.

Though most individual communications between central and local government are of good quality, there are so many that poor ones can still have a significant impact. Departments’ standards for, and oversight of, their communications with local government are not systematic enough to eliminate the risk of some poor communications slipping through. Local authorities are also exasperated by the poor targeting of emails to relevant audiences, wasting the time of the hundreds of people who receive each one. This is of particular concern to local authority managers working with fewer staff following cost reductions.

The National Audit Office has today published its report on assurance for major government projects, such as the introduction of large IT systems, the construction of ships and helicopters and major changes to how services are delivered. The report supports the changes that government has made to the central assurance system for such projects – in particular, the launch of the Major Projects Authority – and finds that they have resulted in some significant impacts.

However, the system is not yet ‘built to last’. Processes need to be formalised, and the Authority, HM Treasury and departments need to co-operate more if these improvements are to continue. Transparent reporting of project data would also create a more effective and enduring system.

According to today’s report, there are 205 projects in the Government Major Project Portfolio, with a combined whole-life cost of £376 billion, and annual cost of £14.6 billion. Thirty nine of those projects have a delivery confidence rating of ‘red’ or ‘amber/red’.

An effective central system that gives assurance over project progress is critical for ensuring successful outcomes. In 2010, the NAO reported that the central assurance system for major projects was not optimal and, in response, government established the Major Projects Authority. This has led to improvements in the central assurance system, including better quality and visibility of government project data and better evidenced assurance reports which support HM Treasury’s decisions to cease funding failing projects.

There is not yet close co-operation between the different organisations involved in the assurance system. Departments have not fully implemented the requirement to have Integrated Assurance and Approvals Plans, and are not providing the Authority with enough staff to use as assurance reviewers. HM Treasury has not engaged as strongly as we would have expected. While there is engagement at working level and Infrastructure UK, a unit within HM Treasury, has attended most of the Authority’s board meetings, the senior officials from HM Treasury’s Public Spending Group have not attended the majority of the board meetings. HM Treasury is also not routinely using the Authority’s project data to spot and address potential problems across the portfolio of projects. Cabinet Office, HM Treasury and departments have not yet agreed on how to publish project information transparently.

Capacity constraints have had an impact on the effectiveness of the assurance system. The Authority is reporting on 160 more projects as part of the portfolio and carrying out more in-depth assurance work, but has 40 per cent fewer staff than the body it replaced. As a result, processes for sharing project lessons and for continuously improving the system remain informal, and there is overdependence on key individuals in the system. Local government projects do not fall within the Authority’s scope, and the Authority would not have the resources to assure these activities.

The National Audit Office has reported on how government is fulfilling its commitments to promote the transparency of public information. The report recognises the strength of the strategic case for greater transparency, and highlights progress across government in fulfilling most of its initial commitments. However, government needs a better understanding of costs, benefits and use to assess whether transparency is meeting its objectives of increasing accountability, supporting service improvement and stimulating economic growth.

The Government has significantly increased the amount and type of public sector information released. Twenty-three out of 25 commitments by central government, due by December 2011, had been met by that month. However, the assessment of value for money is underdeveloped. While the Cabinet Office has identified six types of potential benefits from open data, it is not yet using this framework to evaluate the success and value for money of its various transparency initiatives. The new Open Data Institute will have a role to improve evidence on economic and public service benefits of open data, although the range and scope of its work is not yet clear.

Levels of public interest in the different types of information released vary. Some releases have generated significant interest. For example, the police crime map website had an estimated 47 million visits between February and December 2011, while the Department for Education reported an 84 per cent increase in the use of its comparative schools data, since the site has been made more accessible. However, departments reported less interest in the standard releases required of all departments, such as information on spending over £25,000. More than four-fifths of visitors to the Government website data.gov.uk leave the site immediately without accessing any further link, although these users may then access data from other sources.

In some sectors, data that would better inform accountability or choice is either not held or not yet made available. For example, in social care, neither the Department of Health nor its funded bodies collect appropriate information on comparative costs and performance of providers of home care for adults. For local government services, the Government has discontinued established performance frameworks and the Local Government Association is developing a new approach to performance reporting.

The Government estimates that public data already contributes £16 billion annually to the UK economy. The 2011 Autumn Statement announced new transparency commitments to stimulate additional economic growth, including releases of data not previously available, and opening access to data previously traded. However, its ability to maximise economic growth from traded data is constrained by current arrangements to charge for data, and limited understanding of potential benefits.